If you are anything like me, the sight and news of the Coronavirus has got you hunkered down in your basement, covering your family with a shower of antibacterial hand sanitizer (and the last thing on your mind is around global supply chain). But maybe you’re not one to run to the hills and have maintained the status quo in your life (don’t worry, I’ll worry for you!). And maybe you aren’t concerned at all and have continued to fly globally without a second thought. Either way, there are major global effects to be monitored and discussed.
If you’ve read any previous blogs of mine, you know I’m not an overly technical writer. Those pieces tend to be hard to digest, so I tend to stray away from duplicating the effort of serious academic scholars. Therefore, I will try to provide some insight into the effect it could have on your business, supply chain, or category strategy – with a little bit of personality!
Global Supply Chain Impact
When managing indirect categories (especially Marketing), you tend to think that any outside influence will have a minimal effect on your strategy or product. Especially since advertising agencies, print services, media purchasing, or promotional products typically are part of a saturated marketplace. There are tons of them. Everywhere. So no need to panic.
If you manage indirect or other direct categories, you may have more of a concern. Especially if you work for a tech. company who outsourced their production to China. (I’m looking at you Apple!). Or maybe you cover travel management and have to worry about not only the sourcing portion of it, but also the security and personal aspect to protect your employees. Either way the coronavirus will affect all of us in some way, even if it’s at a personal level.
Who Within Supply Chain has the Most to Worry About?
So what companies or industries have the most to lose (because they’ve outsourced a bunch of production to China):
- Software and High Tech. including components and hardware – Apple, Dell, Google, Microsoft, Sony
- Automotives – GM, Ford, etc.
- Apparel – Nike and most other major retailers
- *Travel/tourism – although they haven’t outsourced production, the airlines, hotel chains, etc. are impacted by a reduction in travel globally (especially to/from China)
My assumption is you should have a contingency plan (a back-up) in place for times like these. Now, if you don’t… well, you sure as hell better get one quickly! Who knows how long this will last (although, I’m keeping my fingers crossed). And with cities completely shut down, no one leaving their houses, you might want to start manufacturing in other locations, vs. waiting it out.
Otherwise, brace yourself for a cash flow impact down the road. If you can’t produce anything, you can’t sell it either. But I’m surely preaching to the choir right… I mean, who doesn’t have a year-plus worth of inventory in place? We’re all professionals here; I’m sure you have it covered even if low inventory management is a driving business factor.
Additional Global Supply Chain Considerations
Logistics – I can’t even imagine the ripple effect of shutting down all of those shipping ports, airports, and rail systems. Nothing is leaving that area of China, and if the virus expands, even less tech. will be produced.
Masks, plastic gloves, and other lab equipment – I just heard on the news that masks are sold out. I’m sure other medical consumables will be high in demand and create a shortage in the system.
Oil – Due to the decrease in usage, they are planning to cut production, thus driving down oil prices. Maybe it’s a small silver lining.
I’m sure there is a huge list of specific raw materials, chemicals, or even technology components primarily produced in China. Given I’m not focused on the direct side of production, I can speak to the specifics of them. So my suggestion, if you have any on this list, or even think they could be – I’d contact my suppliers ASAP. And for indirect folks, still keep a keen eye on it and make sure even consumables or packaging on your list aren’t affected. Otherwise, it could be a tough year for you too!